We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.

Analytical approximation of the transition density in a local volatility model

PASCUCCI, ANDREA;S. Pagliarani
2012

Abstract

We present a simplified approach to the analytical approximation of the transition density related to a general local volatility model. The methodology is sufficiently flexible to be extended to time-dependent coefficients, multi-dimensional stochastic volatility models, degenerate parabolic PDEs related to Asian options and also to include jumps.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11585/107769
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